Over Thai food in a communal dining area at the Fueling Station, a vibrant co-working space in Toronto, software entrepreneur Matt York talks about the financial relief of being able to build his startup without the costly commitment of a long-term lease.

"That's one of the main benefits [of co-working]. You can start small, with room to grow," says Mr. York, a co-founder of Loopio, which has created a software program to streamline and speed up the process of responding to contracts put out to tender.

The three co-founders started with one tiny office. Less than two years later, their team has grown to seven and Loopio now occupies three offices within the Fueling Station on a month-to-month basis. Internet, electricity, boardroom access, receptionist service and shared kitchen facilities are included in the package. "You don't have to set up hydro, you don't have to get a fridge," Mr. York says.

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While Loopio opted for private dedicated offices, which start at $850 a month, other sole operators and small businesses can go the "semi-private" route with designated desks, starting at $395 a month, or "not-at-all-private" shared tables for $200 or more a month, says Rod Bell, a founding partner at the FuelingStation.

It's an airy workspace in Toronto's trendy Liberty Village district, where mothballed factories and industrial buildings have been converted into modern offices.

Mr. Bell says the flexibility of co-working arrangements make it easier for companies to come and go without the headache of breaking a lease. This is particularly valuable to thriving enterprises that have grown out of a co-work space and reached a size where they need their own office, boardroom, culture and receptionist.

While the Fueling Station places no limits on company size, co-working is best suited to smaller operations, Mr. Bell says. Some co-working operators suggest that a work group of more than eight or 10 is too big and too dominant to benefit from the culture of collaboration with other entrepreneurs – a core value of the burgeoning co-working community in Canada and elsewhere.

"It's not a real estate game," says Christine Andrews, founder and operator of AcmeWorks, another Toronto co-working spot. "I can recognize people who are just looking for a cheap desk and I actually don't accept them into the space."

Ms. Andrews says "a huge amount of collaboration happens in the Acme space – a developer, [for example,] will quickly join another team to help them out with a problem." Or, as happened recently, a member company that needed some marketing material proofread on deadline "threw out a blast to the community – is there a designer in here who could give us two hours of their time?"

As co-working business operators, Mr. Bell and Ms. Andrews say an important part of their role is to help members make the connections they need to succeed and grow out of the space.

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"A lot of these young companies will have a great service or a great product, but a lot of times what they are missing is how to sell it, how to market it. That's where a little grey hair mixed with a great product from youth goes a long way," Mr. Bell says.

The point at which it is time to move on varies from company to company, Ms. Andrews says. It typically happens when the business has taken off.

"In many cases they got the funding they were looking for, so there is a point where the company is ready to move into their own space and start really bringing their culture to life."

For those who have not reached that point, the benefits of co-working go well beyond the cost savings associated with working in shared space. At the Fueling Station, some of Loopio's fellow co-workers have become customers. Web designer International Web Development Corp. has teamed up on some projects with the branding specialists in the next office.

A lot of spontaneous collaboration happens in the kitchen, says International Web Development's founder Brian Kumarasamy. Apart from the entrepreneurial energy and idea generation that suffuses the co-working environment, there are real benefits to being able to focus on the business without having to worry about all the overhead costs associated with a more commercial office setting.

(A full-time receptionist would typically cost a small business $35,000 or more a year, Mr. Bell notes. "As you get bigger, you can justify the hire." At the Fueling Station, the cost is covered by the membership fees.)

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"Do you know how nice it is to say [to clients], 'Just talk to the receptionists and they'll call me?' It makes my life so much easier. There's a lot of administration we just don't have time for, otherwise we'd be swamped," says Mr. Kumarasamy, whose firm designs and maintains websites for more than 500 clients worldwide.